Nonrecourse - sustany/dvg GitHub Wiki

Nonrecourse refers to a type of debt where the creditor may only look to the collateral to satisfy the unpaid loan, and not the debtor�s personal assets (as with a recourse loan). For example, the Seventh Circuit in Racine v. Commissioner defined nonrecourse debt as, �an arrangement in which the lender agrees to look exclusively to the collateral, and never to dun the borrower for a deficiency if a sale of the collateral fetches less than the balance.�

To determine whether a loan is recourse or nonrecourse, courts will look to the language of the debt instrument. For example, the Southern District of New York in Veleron Holding v. Stanley found that a debt was a recourse loan by looking to parts of the credit agreement. The court pointed to one section which stated that the creditor, �may ... bring suit at law, in equity or otherwise, for ... the recovery of any judgment for any and all amounts due in respect of the Obligations.� The court interpreted this to mean that the creditor may sue the borrower for �the full amount due under the loan, including any deficiency after the sale of the pledged collateral.� In some instances, however, whether a debt is recourse or nonrecourse does not alter the treatment of the debt. For example, in Crane v. Commissioner, the U.S. Supreme Court found that a seller of a property realized gain on the sale of a property when the buyer assumed the seller�s mortgage on the sold property regardless of whether the mortgage was recourse or nonrecourse.�